Kone Elevators - Important principles on distinction between contract for sale of goods and works contract explained
This is an important judgement by the Constitution Bench of the Hon'ble Supreme Court which distinguishes the earlier judgement passed in the case of Kone Elevators in 2005. It will impact all nature of ‘works contracts’ across the country and will help resolve a large quantum of pending litigation.
It has been held that the said contract of erection and commissioning of lifts/ elevators are works contracts and after the 46th Constitutional Amendment VAT/ Sales Tax can be levied only on the goods component involved in execution of such contracts and not on the total value of the contract.
Constitution Bench of Supreme Court holds that Contract for Erection, Commissioning, Installation of Lifts is a ‘Works Contract’ and not ‘Contract for sale of goods'.